On December 1, 2020, the Colorado Department of Revenue adopted amendments to its tangible personal property rule – Rule 39-26-102(15) – that will impose sales tax on sales of streaming digital goods. The Department considers these amendments to be a “clarification” of their tangible personal property definition. Now, per the amended regulation, “[t]he method of delivery does not impact the taxability of a sale of tangible personal property” and includes tangible personal property delivered by compact disc, electronic download, or Internet streaming. In particular, where a purchaser pays a monthly subscription fee “to select and stream movies and television shows from a library of available titles[,]” sales tax will be due on that monthly fee. However, non-taxable computer software will continue to not be subject to sales tax. If a purchase includes both tangible personal property and services, sales tax will be due on the purchase price if the true object of the purchase is the tangible personal property.
On December 18, 2020, the Colorado Office of the Attorney General reviewed the rule and found “no apparent constitutional or legal deficiency in their form or substance.” Now that the Attorney General has reviewed the rule, it will be published in the January 10, 2021 Colorado Register and take effect 20 days later, on January 30, 2021.